A new U.S. trade deal with Indonesia secures fossil fuels and access to
critical minerals
[March 18, 2026] By
ANIRUDDHA GHOSAL and ANTON L. DELGADO
HANOI, Vietnam (AP) — A new trade pact between Indonesia and the United
States has recast their economic ties, binding Jakarta’s resource wealth
and energy future more closely to Washington’s strategic needs.
Indonesia agreed to widen access for U.S. investors in critical
minerals, boost its purchases of U.S. crude and liquefied petroleum gas,
back the development of an American coal export corridor and cooperate
on small modular nuclear reactors.
In turn, the U.S. trimmed a threatened 32% tariff on Indonesian goods to
19% and granted broader access to the American market, including a
zero-tariff entry policy for major products such as palm oil, coffee,
cocoa, spices and rubber.
Though the U.S. Supreme Court's ruling against President Donald Trump's
tariffs may impact how it is implemented. The deal fits with longer term
U.S. efforts to secure critical mineral supply chains, beef up its oil
and gas exports and reduce dependence on China.
Meanwhile other export-reliant Southeast Asian economies negotiating
with the United States, including Vietnam, are closely watching the
Indonesia–U. S. trade deal for clues about the tariff levels and
concessions Washington may demand across the region.
Indonesia, the world’s largest nickel producer, has vast mineral
reserves needed for electric vehicles and clean energy systems. It's
caught between the conflicting aims of the U.S. and China, a key source
of foreign investment and market for Indonesian coal and nickel,
analysts say.
China is concentrating on electrification, renewables and dominance of
battery supply chains, while the U.S. is pairing its push for mineral
access with more fossil fuel exports.
Haryo Limanseto of Indonesia's Coordinating Ministry for Economic
Affairs, said the deal's energy provisions “balance foreign trade and
meet domestic energy needs.”
“The leadership of Indonesia is trying to tread a fine line between the
West and China,” said Putra Adhiguna of the Jakarta-based Energy Shift
Institute, adding that Chinese influence is “inescapable” since it is
Indonesia’s largest trading partner.
US gains a new foothold to Indonesia's minerals
Indonesia has pledged to promote U.S. investment across its mineral
industry, from exploration and mining to refining, transport and export.
In some cases, American investors will receive treatment “no less
favorable” than domestic firms.
Restrictions on exports of critical minerals to the U.S. will be relaxed
to expedite development of Indonesia's rare earths and critical minerals
sector with U.S. partners, promising “greater certainty” for companies
involved in extraction to help boost production, the agreement says.
Major policy shifts have altered Indonesia’s mining sector in the past
six months and the trade deal's new restrictions on existing
foreign-owned entities in Indonesia will curb excess output from
processing plants. Foreign businesses must follow the same tax,
environmental, labor and quota rules as other companies.
Indonesia’s critical mineral processing sector is currently dominated by
China, which has firms operating or financing multiple nickel smelters
and industrial parks.
“Indonesia is absolutely central to this competition because it combines
resource endowment with political ambition,” said Kevin Zongzhe Li, with
the Center for China Analysis within the Asia Society Policy Institute,
a New York-based think tank.
Competition over critical minerals is heating up and the agreement
“opens the door for U.S. firms to have a real shot” at “modestly
leveling a sector where Chinese industries established first mover
advantage,” he said.
Indonesia to purchase more US energy
Indonesia has agreed to cut red tape so that its companies can more
easily purchase U.S. energy products.
It plans to buy $15 billion worth of American energy commodities over an
unspecified period, mainly fossil fuels such as liquefied petroleum gas,
crude oil and gasoline.
[to top of second column] |
Barges fully loaded with coal are anchored on Mahakam river in
Samarinda, East Kalimantan, Indonesia, on Dec. 19, 2022. (AP Photo/Dita
Alangkara, File)
 Trump's efforts to persuade Asian
countries to buy more American LNG has gained momentum during trade
talks, with energy purchases emerging as a way to narrow trade gaps.
It's unclear if the turmoil in oil trading due to the war with Iran
might impact that effort.
Indonesia, one of the world’s top coal exporters,
will also invest in developing an export corridor from the U.S. West
Coast to help make American coal more competitive in global markets,
the agreement says.
Indonesia also pledged to work with the U.S. and Japan to deploy
small modular nuclear reactors, starting with a potential project in
West Kalimantan.
Shift in energy transition policies
The deal reflects changed U.S. energy priorities under the Trump
administration, away from cooperation on reducing Indonesia's
climate change -causing emissions.
In 2022, Indonesia joined the Just Energy Transition Partnership, a
multi-billion deal where the U.S. and other wealthy nations pledged
support for reducing coal use and expanding clean energy. The
program was faltering even before Trump withdrew from it last year.
Despite the U.S. withdrawal, Indonesian officials said the $21.4
billion partnership will continue. As of January, at least $3.4
billion, around 15%, of the funds had been received, according to
Airlangga Hartarto, Indonesia's minister for economic affairs.
Adhiguna said the deal’s biggest impact may be political, with
Jakarta emulating the U.S. emphasis on fossil fuel use.
“There is the risk that the political leadership of Indonesia is
going to fall back into that hole,” Adhiguna said.
That will mean still slower progress in areas like solar energy.
Over the past five years, tropical, sunny Indonesia has installed
less than 1 gigawatt of solar energy — compared with roughly 2 GW in
Vietnam and nearly 60 GW in India. The International Energy Agency
found that fossil fuels, like coal, oil and natural gas, made up
nearly 78% of Indonesia’s energy mix in 2023.
Indonesia should prioritize building 100 GW of solar and storage
capacity and expand interconnection grids to enable renewable energy
sharing, said Dinita Setyawati, with the United Kingdom-registered
energy think tank Ember.
Tariff strike down creates confusion
The deal’s future has been clouded by the U.S. Supreme Court's
recent ruling against Trump’s sweeping global tariffs, just after
the agreement was reached — casting doubt on the durability of his
trade strategy. The agreement requires ratification by Indonesia’s
parliament before it can take effect.
That adds another “layer of uncertainty,” said Meha Sitepu, with the
Washington-based strategic advisory firm The Asia Group.
Some provisions of the agreement are drawing criticism, including
those that are seen as diluting Indonesia’s halal certification
requirements in the mostly Muslim country of nearly 288 million,
Southeast Asia's most populous nation.
“Parliamentary approval could be an uphill battle and added
uncertainty from the U.S. side may complicate things further,”
Sitepu said.
___
Delgado reported from Bangkok, Thailand. Associated Press writer
Edna Tarigan in Jakarta contributed to this report.
All contents © copyright 2026 Associated Press. All rights reserved |
